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Barometer 2016: Social and economic performance of French digital business start-up

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EY
EY

The fifth edition of this annual barometer, realized in collaboration with France Digitale, presents the social and economic performance of French digital business start-up financed by venture capitalists. More information on : ey.com/FR/FranceDigitale

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Social and economic performance of French digital business startups Barometer 2016
Summary 1. Edito 2. Executive summary 3. Lessons 3.1 Methodology 3.2 Revenues 3.3 Fund raising 3.4 Innovation support 3.5 People 3.6 Value sharing 3.7 Hot topics 4. Contacts
Edito1.
Edito1 1/ Hyper and sustainable growth Startups revenues increased year over year, +39% of growth for 2014-2015 period, with an aggregate of 4,2 B€. No matter the size of startups participating to the survey is, respondents are growing astonishingly. Another remarkable point: growth is sustainable. Even if we observe a 25% increase revenues in France versus 2014, growth also comes from revenues outside of France. Ever since the 2013 Edition, revenues made outside France constantly increased to reach 51% of total revenues in 2015, a record in the FD-EY barometer history. France has now not only worldwide digital champions but also “born global” players developing their activities worldwide extremely quickly. 2/ Startups are looking more than ever for talents Total staff of the barometer grew significantly, i.e +27% versus 2014. In average, there were 13 jobs created per startups in 2015, a significant number taking into account that there are thousands of digital startups in France. The trend should be the same in 2016: 94% of participants confirm they will hire. Even if, workforce is mainly located in France… Even though French startups keep growing their business outside France, data show that they still focus on hiring talents locally. For each new job created outside France, more than two jobs were created in France in 2015. …Talents and labor costs are the biggest threats to their development The n°1 brake to development is the difficulty to find the right talents, especially when it comes to hiring IT developers, the most difficult talents to hire. Labor costs are also pointed out as the second major brake to development by 37% of French entrepreneurs. 3/ Financing remains one of the main priorities for startups Participants are considering “Financing” as the third main brake to their development. In 2015, respondents raised more than 1 B€* which is remarkable. Whatever their size, startups succeed in raising funds. Another key point is the growing role of foreign investors. French ecosystem is favorable. Participants are massively using state incentives and benefit from BPI France actions (equity investments, grants…). However, the percentage of startups using incentives has been steadily declining for the last three years (68% in 2015 versus 77% in 2013 for Research Tax Credit), which shows that criteria used to be a beneficiary of Research Tax Credit need to be adapted for fast-growing digital startups which heavily spend in sales and marketing to grab market shares and increase revenues. 4/ Digital startups are designing a new organization model Founders and managers are working on a new model where employees are interested in the performance of the startups through use of equity instruments to motivate their teams. 98% of the respondents are today using this kind of instruments! In average, 51% of total staff own equity shares. For “+ 50 M€ revenues” category startups, this percentage increases to 75%, demonstrating that ambition is fully shared by both management and employees. Franck Sebag Partner, EY VC & IPO Leader France Xavier Lorphelin Managing Partner Serena Capital *from Business Angels, VC, IPO, and Follow-ons.
Executive summary 2.
Social and economic performance of French digital business startups PeopleHyper, sustainable and global growth www.ey.com/fr/FranceDigitale 50% +39% of revenues vs 2014 29% of startups have a foreign investor that already invested in the firm 91% of startups have positiv « EBIT » when reaching 50 M€ of revenues 51% of revenues are generated abroad in 2015 +27% of employees vs 2014 92% of permanent contracts For 1 job created abroad, more than 2 jobs are created in France 65% of the participants have difficulties to hire developers Innovation support 53% of the sample used « Young Innovative Company » tax incentive 68% Research Tax Credit remains the preferred state incentive 51% of total staff own equity instruments 98% 98% of startups use equity instruments 97% never distributed dividends Value sharing
Lessons3.
Methodology3.1
Methodology ► Barometer based on data from digital business startups financed through business angels, venture capital, IPO and follow-ons. ► Survey sent by venture capitalists to companies they invested in 224 participants (171 participants in 2014) Average age: 6 years 2,8 M€ invested by VC (median) Key figures from financial data 2014 & 2015 ► EY as a third-party to consolidate the data and ensure that the figures are kept confidential 3.1
Revenues3.2
3.2 Revenues 3 013 4 200 0 1 500 3 000 4 500 55% 35% 40% 0% 20% 40% 60% 0 to 5 M€ 5 to 50 M€ + 50 M€2014 2015 Growth of total revenues (in %) Analysis by revenue segment Total Revenues (in M€) +37% 2015 Edition +33% 2014 Edition +39% 2016 Edition
Growth of revenues (in M€) 1 644 (55%) 2 053 (49%) 647 (21%) 915 (22%) 722 (24%) 1 232 (29%) 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 2014 2015 France Europe International +25% + 57% Part of revenues outside France out of the total revenues (within the last three Editions of the barometer) 3.2 Revenues 51% 45% 39% 33%2014 Edition 2016 Edition 2015 Edition 2013 Edition
Fund raising3.3
Total of funds raised by category (in M€) (From Business Angels,VC, IPO and Follow-ons Total of funds raised (in M€) (Since startups inception) 3.3 Fund raising 2 794 M€ 1 787 M€ Year 2015 Year 2014 No matter what the size of startups is, they all succeed in raising funds. Raised in 2015 336 780 671 488 1 216 1 090 0 200 400 600 800 1 000 1 200 1 400 0 to 5M€ 5 to 50M€ + 50 M€ 2014 2015
Average and median* of funds raised (in M€) Analysis by revenue segment 4 23 64 3 11 20 0 10 20 30 40 50 60 70 0 to 5M€ 5 to 50M€ + 50M€ Average Median Percentage of startups that are International investors backed Percentage of foreign investors funding French digital business startups. Analysis achieved by revenue segment. 3.3 Fund raising * Median : middle value in a series of values arranged from smallest to largest 27% 29% 50% 0% 10% 20% 30% 40% 50% 60% 0 to 5 M€ 5 to 50 M€ + 50 M€
% of digital startups that raised funds 50% 42% 25% 0% 10% 20% 30% 40% 50% 60% 0 to 5M€ 5 to 50M€ +50M€ 3.3 Fund raising Number of startups that raised funds in 2015 by sales category
Innovation support3.4
Did you use Research tax credit ? 68% Yes 32% No 30% No 70% Yes *Analysis based on a sample of 145 startups* Analysis based on a sample of 128 startups 3.4 Innovation support As a reminder, in 2014 Edition of the barometer, 77% of respondents were using research tax credit. sample of 86 startups in 2014 edition Did you use Competitive employ tax credit ?
Did you receive BPI France grants ? *Analysis based on a sample of 128 startups 53% Yes 47% No * Analysis based on a sample of 103 startups 3.4 Innovation support 51% 37% of companies declare receiving BPI grant in 2015 of companies declare receiving BPI grant in 2014 Did you use the label « Young Innovative Company » ?
People3.5
People 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 2014 2015 13 809 10 864 2083 hired in France 3.5 People 2 945 2016 Edition jobs created For one job created abroad, more than two jobs are created in France. 862 hired abroad
Type of work contracts (2015) People qualification (2015) 92% permanent contract (CDI) 3% Temporary contract (CDD & Interim) 1% Professional training contract 4% Internship 4% 20% 74% 2% High-school diploma or less Bachelor Degree or less Master Degree PhD *Analysis based on a sample of 131 startups 3.5 People *Analysis based on a sample of 100 startups
Employees breakdown by revenue segment 41% 5 to 50 M€ 42% + 50 M€ 17% 0 to 5 M€ *Analysis based on a sample of 201 startups 3.5 People
39 31 0 5 10 15 20 25 30 35 40 45 Average age Management Average age Employees Average age of staff 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 Minimum Average Maximum 0,5 2,4 13,2 Ratio Management / Staff wages (2015) 3.5 People
Serial entrepreneur Chief Executive officer (men or women) 48% Yes 52% No 92% Men 8% Women * Analysis achieved on a sample of 147 startups * Analysis achieved on a sample of 105 startups 3.5 People
Value sharing3.6 BENEFITS Rewards
EBIT (Earnings Before Interests and Taxes) 22% 39% 91% 0% 20% 40% 60% 80% 100% 0 to 5M€ 5 to 50 M€ + 50 M€ Percentage of positive “EBIT” by revenue segment 31% Gain 69% Loss Did you distribute dividends since the creation of the company ? 97% No 3% Yes 3.6 Value sharing * Analysis achieved on a sample of 182 startups * Analysis achieved on a sample of 182 startups * Analysis achieved on a sample of 201 startups
Are you using equity instruments to motivate your team ? 2% No 98% Yes * Analysis achieved on a sample of 107 startups 70% 12% 18% Warrants (BSPCE) Free shares (actions gratuites) Stock-options & common shares (BSA) Type of equity instruments ? 3.6 Value sharing
Percentage of employees owning equity instruments Percentage calculated by doing the ratio: number of employees owning equity instruments divided by total number of employees. First chart gives global data and the second chart is presented by revenue segment 2016 Edition * Analysis based on a sample of 105 startups 47% 30% 75% 0% 20% 40% 60% 80% 0 to 5 M€ 5 to 50 M€ + 50 M€ 3.6 Value sharing 51% Of staff owning equity instruments
Hot topcis3.7
Do you plan external growth to pursue your development ? 30% Yes 70% No 3.7 Hot topics * Analysis based on a sample of 141 startups
Barriers for development ? 3.7 Hot topics * Analysis based on a sample of 215 startups 20% 17% 15% 10% 10% 14% 11% 8% 16% 8% 10% 9% 10% 10% 10% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Talent Labor costs and charges Financing Partnerships and contracts Laws and regulations First Choice Second choid Third choice
Focus on recruitments for the year 2016 ? 94% Will hire in 2016 33% 9% 8% 50% Sales representatives / Marketing Consultants /Customers supports Data Science / Business Intelligence Programmers / Developers * Analysis based on a sample of 114 startups Looking for** Looking for** Difficulties to hire 3.7 Hot topics 65% Consider that IT Developers are the most difficult Staff to recruit ** Analysis based on a sample of 134 startups *** Analysis based on a sample of 109 startups
Contacts4.
4 Contacts Xavier Lorphelin Managing Partner Serena Capital @Xlorphelin Franck Sebag Partner, EY VC & IPO Leader France @frsebag
About France Digitale France Digitale brings together the champions of digital entrepreneurship: startups with strong growth plans and potential investors (venture capitalists and business angels). To build an alliance between digital entrepreneurs and investors, so that France becomes fertile ground for the creation of digital champions of International stature. For more information, please visit www.francedigitale.org. EY I Assurance I Tax I Transactions I Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for communities. EY has been supporting entrepreneurs and fast growing companies for more than 30 years. 1500 collaborators in 15 offices in France are dedicated to serving the unique needs of high-growth companies to help them grow into market leaders, whatever their size or sector. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.

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Barometer 2016: Social and economic performance of French digital business start-up

  • 1. Social and economic performance of French digital business startups Barometer 2016
  • 2. Summary 1. Edito 2. Executive summary 3. Lessons 3.1 Methodology 3.2 Revenues 3.3 Fund raising 3.4 Innovation support 3.5 People 3.6 Value sharing 3.7 Hot topics 4. Contacts
  • 4. Edito1 1/ Hyper and sustainable growth Startups revenues increased year over year, +39% of growth for 2014-2015 period, with an aggregate of 4,2 B€. No matter the size of startups participating to the survey is, respondents are growing astonishingly. Another remarkable point: growth is sustainable. Even if we observe a 25% increase revenues in France versus 2014, growth also comes from revenues outside of France. Ever since the 2013 Edition, revenues made outside France constantly increased to reach 51% of total revenues in 2015, a record in the FD-EY barometer history. France has now not only worldwide digital champions but also “born global” players developing their activities worldwide extremely quickly. 2/ Startups are looking more than ever for talents Total staff of the barometer grew significantly, i.e +27% versus 2014. In average, there were 13 jobs created per startups in 2015, a significant number taking into account that there are thousands of digital startups in France. The trend should be the same in 2016: 94% of participants confirm they will hire. Even if, workforce is mainly located in France… Even though French startups keep growing their business outside France, data show that they still focus on hiring talents locally. For each new job created outside France, more than two jobs were created in France in 2015. …Talents and labor costs are the biggest threats to their development The n°1 brake to development is the difficulty to find the right talents, especially when it comes to hiring IT developers, the most difficult talents to hire. Labor costs are also pointed out as the second major brake to development by 37% of French entrepreneurs. 3/ Financing remains one of the main priorities for startups Participants are considering “Financing” as the third main brake to their development. In 2015, respondents raised more than 1 B€* which is remarkable. Whatever their size, startups succeed in raising funds. Another key point is the growing role of foreign investors. French ecosystem is favorable. Participants are massively using state incentives and benefit from BPI France actions (equity investments, grants…). However, the percentage of startups using incentives has been steadily declining for the last three years (68% in 2015 versus 77% in 2013 for Research Tax Credit), which shows that criteria used to be a beneficiary of Research Tax Credit need to be adapted for fast-growing digital startups which heavily spend in sales and marketing to grab market shares and increase revenues. 4/ Digital startups are designing a new organization model Founders and managers are working on a new model where employees are interested in the performance of the startups through use of equity instruments to motivate their teams. 98% of the respondents are today using this kind of instruments! In average, 51% of total staff own equity shares. For “+ 50 M€ revenues” category startups, this percentage increases to 75%, demonstrating that ambition is fully shared by both management and employees. Franck Sebag Partner, EY VC & IPO Leader France Xavier Lorphelin Managing Partner Serena Capital *from Business Angels, VC, IPO, and Follow-ons.
  • 6. Social and economic performance of French digital business startups PeopleHyper, sustainable and global growth www.ey.com/fr/FranceDigitale 50% +39% of revenues vs 2014 29% of startups have a foreign investor that already invested in the firm 91% of startups have positiv « EBIT » when reaching 50 M€ of revenues 51% of revenues are generated abroad in 2015 +27% of employees vs 2014 92% of permanent contracts For 1 job created abroad, more than 2 jobs are created in France 65% of the participants have difficulties to hire developers Innovation support 53% of the sample used « Young Innovative Company » tax incentive 68% Research Tax Credit remains the preferred state incentive 51% of total staff own equity instruments 98% 98% of startups use equity instruments 97% never distributed dividends Value sharing
  • 9. Methodology ► Barometer based on data from digital business startups financed through business angels, venture capital, IPO and follow-ons. ► Survey sent by venture capitalists to companies they invested in 224 participants (171 participants in 2014) Average age: 6 years 2,8 M€ invested by VC (median) Key figures from financial data 2014 & 2015 ► EY as a third-party to consolidate the data and ensure that the figures are kept confidential 3.1
  • 11. 3.2 Revenues 3 013 4 200 0 1 500 3 000 4 500 55% 35% 40% 0% 20% 40% 60% 0 to 5 M€ 5 to 50 M€ + 50 M€2014 2015 Growth of total revenues (in %) Analysis by revenue segment Total Revenues (in M€) +37% 2015 Edition +33% 2014 Edition +39% 2016 Edition
  • 12. Growth of revenues (in M€) 1 644 (55%) 2 053 (49%) 647 (21%) 915 (22%) 722 (24%) 1 232 (29%) 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 2014 2015 France Europe International +25% + 57% Part of revenues outside France out of the total revenues (within the last three Editions of the barometer) 3.2 Revenues 51% 45% 39% 33%2014 Edition 2016 Edition 2015 Edition 2013 Edition
  • 14. Total of funds raised by category (in M€) (From Business Angels,VC, IPO and Follow-ons Total of funds raised (in M€) (Since startups inception) 3.3 Fund raising 2 794 M€ 1 787 M€ Year 2015 Year 2014 No matter what the size of startups is, they all succeed in raising funds. Raised in 2015 336 780 671 488 1 216 1 090 0 200 400 600 800 1 000 1 200 1 400 0 to 5M€ 5 to 50M€ + 50 M€ 2014 2015
  • 15. Average and median* of funds raised (in M€) Analysis by revenue segment 4 23 64 3 11 20 0 10 20 30 40 50 60 70 0 to 5M€ 5 to 50M€ + 50M€ Average Median Percentage of startups that are International investors backed Percentage of foreign investors funding French digital business startups. Analysis achieved by revenue segment. 3.3 Fund raising * Median : middle value in a series of values arranged from smallest to largest 27% 29% 50% 0% 10% 20% 30% 40% 50% 60% 0 to 5 M€ 5 to 50 M€ + 50 M€
  • 16. % of digital startups that raised funds 50% 42% 25% 0% 10% 20% 30% 40% 50% 60% 0 to 5M€ 5 to 50M€ +50M€ 3.3 Fund raising Number of startups that raised funds in 2015 by sales category
  • 18. Did you use Research tax credit ? 68% Yes 32% No 30% No 70% Yes *Analysis based on a sample of 145 startups* Analysis based on a sample of 128 startups 3.4 Innovation support As a reminder, in 2014 Edition of the barometer, 77% of respondents were using research tax credit. sample of 86 startups in 2014 edition Did you use Competitive employ tax credit ?
  • 19. Did you receive BPI France grants ? *Analysis based on a sample of 128 startups 53% Yes 47% No * Analysis based on a sample of 103 startups 3.4 Innovation support 51% 37% of companies declare receiving BPI grant in 2015 of companies declare receiving BPI grant in 2014 Did you use the label « Young Innovative Company » ?
  • 21. People 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 2014 2015 13 809 10 864 2083 hired in France 3.5 People 2 945 2016 Edition jobs created For one job created abroad, more than two jobs are created in France. 862 hired abroad
  • 22. Type of work contracts (2015) People qualification (2015) 92% permanent contract (CDI) 3% Temporary contract (CDD & Interim) 1% Professional training contract 4% Internship 4% 20% 74% 2% High-school diploma or less Bachelor Degree or less Master Degree PhD *Analysis based on a sample of 131 startups 3.5 People *Analysis based on a sample of 100 startups
  • 23. Employees breakdown by revenue segment 41% 5 to 50 M€ 42% + 50 M€ 17% 0 to 5 M€ *Analysis based on a sample of 201 startups 3.5 People
  • 24. 39 31 0 5 10 15 20 25 30 35 40 45 Average age Management Average age Employees Average age of staff 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 Minimum Average Maximum 0,5 2,4 13,2 Ratio Management / Staff wages (2015) 3.5 People
  • 25. Serial entrepreneur Chief Executive officer (men or women) 48% Yes 52% No 92% Men 8% Women * Analysis achieved on a sample of 147 startups * Analysis achieved on a sample of 105 startups 3.5 People
  • 27. EBIT (Earnings Before Interests and Taxes) 22% 39% 91% 0% 20% 40% 60% 80% 100% 0 to 5M€ 5 to 50 M€ + 50 M€ Percentage of positive “EBIT” by revenue segment 31% Gain 69% Loss Did you distribute dividends since the creation of the company ? 97% No 3% Yes 3.6 Value sharing * Analysis achieved on a sample of 182 startups * Analysis achieved on a sample of 182 startups * Analysis achieved on a sample of 201 startups
  • 28. Are you using equity instruments to motivate your team ? 2% No 98% Yes * Analysis achieved on a sample of 107 startups 70% 12% 18% Warrants (BSPCE) Free shares (actions gratuites) Stock-options & common shares (BSA) Type of equity instruments ? 3.6 Value sharing
  • 29. Percentage of employees owning equity instruments Percentage calculated by doing the ratio: number of employees owning equity instruments divided by total number of employees. First chart gives global data and the second chart is presented by revenue segment 2016 Edition * Analysis based on a sample of 105 startups 47% 30% 75% 0% 20% 40% 60% 80% 0 to 5 M€ 5 to 50 M€ + 50 M€ 3.6 Value sharing 51% Of staff owning equity instruments
  • 31. Do you plan external growth to pursue your development ? 30% Yes 70% No 3.7 Hot topics * Analysis based on a sample of 141 startups
  • 32. Barriers for development ? 3.7 Hot topics * Analysis based on a sample of 215 startups 20% 17% 15% 10% 10% 14% 11% 8% 16% 8% 10% 9% 10% 10% 10% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Talent Labor costs and charges Financing Partnerships and contracts Laws and regulations First Choice Second choid Third choice
  • 33. Focus on recruitments for the year 2016 ? 94% Will hire in 2016 33% 9% 8% 50% Sales representatives / Marketing Consultants /Customers supports Data Science / Business Intelligence Programmers / Developers * Analysis based on a sample of 114 startups Looking for** Looking for** Difficulties to hire 3.7 Hot topics 65% Consider that IT Developers are the most difficult Staff to recruit ** Analysis based on a sample of 134 startups *** Analysis based on a sample of 109 startups
  • 35. 4 Contacts Xavier Lorphelin Managing Partner Serena Capital @Xlorphelin Franck Sebag Partner, EY VC & IPO Leader France @frsebag
  • 36. About France Digitale France Digitale brings together the champions of digital entrepreneurship: startups with strong growth plans and potential investors (venture capitalists and business angels). To build an alliance between digital entrepreneurs and investors, so that France becomes fertile ground for the creation of digital champions of International stature. For more information, please visit www.francedigitale.org. EY I Assurance I Tax I Transactions I Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for communities. EY has been supporting entrepreneurs and fast growing companies for more than 30 years. 1500 collaborators in 15 offices in France are dedicated to serving the unique needs of high-growth companies to help them grow into market leaders, whatever their size or sector. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.